NIIT, a leading education and software major, recorded a jump of more than 50% in revenues for the year ended September 2000. This was despite slower growth in its education business. The changing business model of the company from education (contributes 51%) to software (49%) resulted in substantial improvement in margins.
The company is rapidly transitioning itself to an e-business solution provider with e-revenues contributing 41% to global revenues. It also has well diversified geographic mix of software revenues wherein it gets 34% of sales from the US followed by 18% from Europe, 26% from Asia Pacific and balance from India.
NIIT has divided its business into independent business unit namely education & training, projects, software solutions and knowledge solutions. This is expected to help the company in achieving its target of Rs 100 bn revenues by 2006.
Year end September 30
Profit Before Tax
No. of shares (m)
NIIT is expected to record a topline growth of over 40% during the first quarter ended December 2000, led by its aggressive investments in sales and marketing. The company’s efforts have generated large order intakes in the past three months. It has recently received an order worth $31.7 m from Karnataka state for five years. Accordingly, NIIT will set up infrastructure for computer classrooms in 700 schools using latest software and networking technology.
In a move to improve the operating margins, software development centers of the company located at Delhi are working in double shifts. These development centers account for around 60% of its total offshore development capacity. All these factors will fuel bottomline growth, which is expected to be in the vicinity of 90%.
At the current market price of Rs 1,760 NIIT is trading at a P/E multiple of 23 times its September 2001 projected earnings. The company’s current valuations are lower as compared to its peers in the industry. In the coming years, if NIIT is successful in moving up the software value chain, it could trigger a re-rating in the stock.
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